As Arizona looks ahead to its next 100 years, the future of the commercial real estate industry hinges on new infrastructure to keep the state’s economic engine churning while meeting the demands of a growing population.

Since the recession unloaded on the commercial real estate industry in the mid 2000s, it’s been an uphill climb for those in the industry, including general contractors, architects, engineers, subcontractors, developers and brokers.
“We will see a population shift to urban areas with a focus on transit- oriented development,” predicts Bryan Dunn, senior vice president at Adolfson & Peterson Construction. “Commercial property will need to be re-purposed into alternate uses due to the glut of vacant space in the real estate market.

“We will need to find creative ways to own and operate buildings in the future. There is a growing demand for public/private partnerships for municipal and educational facilities, similar to what has been done in Europe,” Dunn says.

AZRE Magazine asks some experts in commercial real estate how they see the industry changing in Arizona over the next decade and beyond. Here are their responses:

Planning and Development

“In the next 10 years, Arizona will finally adopt Tax Increment Financing (TIF) to remain competitive in the business world. The new normal is for less reliance on homebuilding as a jobs industry. Two more high rise office buildings with mixed uses on the lower floors will be built in Downtown Phoenix. In the next 100 years, high-speed rail
will run between Phoenix and Tucson in the Sun Corridor and a new, man-made lake/reservoir will be created north of Phoenix to collect upstream snow melt and serve the needs of Metro Phoenix.”
— Jon Froke, Planning Director, City of Glendale

“During the next 10 years, smaller developments that require less off-site infrastructure and result in lighter commitments from homebuilders are likely. Infrastructure requirements/costs will be lower and financial commitments will be smaller, both of which are desirable to financiers and homebuilder shareholders recovering from the recent downturn.

“In the next 100 years, development and homebuilding will undergo some of the most rapid changes ever. In Metro Phoenix and the Tucson area, densities will undoubtedly increase dramatically; we will grow upward rather than outward, as large metropolitan areas eventually do. The materials builders use will change dramatically, looking and feeling different. There will be stronger and lighter materials. Although hard to imagine, many unique, innovative homebuilding products that will be used the homes of the future have already been developed, we continue to wait for them to be rolled out to consumers.

“The continued development of solar technologies is going to have huge impact on all types of commercial development in Arizona. Imagine buildings – retail, office, industrial, homes – not needing to be hooked up to the grid because they produce all of the energy necessary for their usage. The development of “net-zero” facilities in this market, where sun is plentiful, will have a dramatic positive effect on Arizonan’s lives.”
— Jim Belfiore, President, Belfiore Real Estate Consulting

Brokerage

“The beginning of the change is going on right now. The exchange of ownership has and will have an impact on our industry in the next 10 years. In the RTC days it took about 15 years to fully recover, this current cycle will take 5-7 years to process all of the inventory and for the next wave of owners to re-trade the properties. Banks, special servicers and the FDIC will be in charge of real estate for the long term and all of the assets that are currently under their control won’t make it back into private hands in total for 10 years.

“The medical use of retail space will be in full force, everything about this makes sense, retail buildings, namely big box spaces, have the power, the lower rents and the parking already in place to handle a medical user. This will create truly mixed-use locations.
“Internet sales fulfillment centers will hit a critical mass, even if and/or when the state begins to charge them sales tax, even at a much lower rate. Phoenix is well located, we have a growing economy and it makes a lot of sense that those are now starting to pop up here.

“In the next 100 years, buildings will be far more energy efficient, materials to build buildings will be so much more advanced than we can even imagine. In commercial buildings, there will be more bodies per square foot, more technology, less employees, smaller office size requirements. Thousands of new businesses will be created.”
— Pete Bolton, Managing Director/Executive VP, Grubb & Ellis

“Real estate growth over the next decade will be far more restrained than in the boom period in the 10 years before the onset of the recession. During that time, commercial property inventories routinely expanded by anywhere from 3% to 5% annually, driven by growing tenant demand for space and rents that steadily pushed higher. A return to that environment is unlikely anytime soon.

“Forecasting out over the next 100 years presents a pretty daunting challenge … but all of the demographic trends show Arizona will remain a growth market over the next century and population growth will spur demand for both commercial and residential real estate. Beyond demographics and quality of life factors, we believe global economic patterns will support growth in Arizona.”
— Bob Mulhern, Managing Director, Colliers International

Architecture

“The design and construction industry needs to be at the forefront of determining how Arizona is developed over the next 10 years. We need to take a hard look at the lessons learned from the past 10 years regarding unconstrained growth and sprawl, as well as from the positive developments of renewed urban focus, comprehensive transportation and development plans, and increased integrated project delivery partnerships.

“Architects have the responsibility for shaping the built environment that we all experience on a daily basis and need to ensure that built environment is increasingly sustainable, functionally practical, and aesthetically pleasing. Through technological advances and communication outlets, AIA architects will be continually educating ourselves about, and be more globally aware of industry trends and improvements that can be applied locally, so that Arizona becomes the ideal place to live, work, and play. In addition to increasingly becoming the leading stewards of our built environment through sustainable design and comprehensive planning, You are going to see an increasing significance in the role the design industry plays in the overall development of our communities.

“The industry will partner much more with government and lines will be blurred in community planning, design review, and construction inspection. Public-Private Partnerships and Integrated Project Delivery methods will become the norm, and the design and construction industry will have much more at stake in what they develop beyond their immediate financial compensation.”
— AIA response from Patrick Panetta, ASU; and Chris Knorr, SmithGroupJJR

“All industries, including commercial real estate and architecture, will need to continue to evolve and adapt to emerging technologies. Specifically in the fields of alternative energy and sustainability. I believe the next few years of those 10 years a lot of attention will need to be spent on repurposing existing buildings and facilities. We will obviously need to remain flexible to adapt to the process of becoming stabilized.

“Because technology and technological advances are changing at an exponential rate, I think the next 100 years is beyond reasonable comprehension. Who would have thought 100 years ago that we would be where we are today. However, architecture and real estate haven’t significantly changed over the past 100 years, but we also have not had the multiplying pace of technology at our disposal. Who knows, things like tele-transporting may be a reality over the next century, which of course would drastically change architecture and commercial real estate.”
— Patrick Hayes, President and CEO, PHArchitecture

Legal

“For approximately the first third or half of the next 10 years, commercial real estate will need to focus on absorption and modification to meet current needs of those projects that resulted from overbuilding during prior ‘blow and go’ times in our industry. Creativity and cost-effective adaptation will be needed to recast non-performing or under-performing commercial assets into assets that can meet the needs of current real estate users. As an example, big box retail spaces that have gone dark will need to be adapted and converted into creative uses to accommodate smaller and even different users. Cities and counties may need to modify their zoning to allow for a broader variety of uses that will meet the needs of today’s users.

“One hundred years is a long time and it is difficult and somewhat speculative to attempt to predict what changes will most impact Arizona over such a long time period. However, I suspect that big box retail will downsize as Internet shopping grows over the many years to come. I also suspect that growth in Arizona will have to adjust to demands upon the availability of water and our entire culture will eventually take on a more serious and long-term water approach to and conservation.

“Arizona will need to adapt its economy to more self-sustaining business that is not so dependent upon growth and real estate development. Thus, over the next 100 years Arizona will need to modify its tax and development schemes to accommodate more industry and manufacturing. Finally, Arizona will develop more political clout in Congress and the federal government as its population grows and the state’s economy continues to mature.”
— Don Miner, Director, Fennemore Craig PC

Construction

“The impact construction will have in Arizona over the next 10 years will start with job creation. As the market comes back, the industry will be a leader in putting people back to work. We will need people to fill both direct construction jobs, and jobs that are indirectly related to construction. Every $1B spent in construction results in a total of 20,000 direct and indirect jobs. These jobs will help the middle class, the hardest hit in the last few years in terms of job loss.

“Construction is one of the top five industries nationally, and by then (10 years from now) it will be back among the top five industries for Arizona. Finally, the use of public/private partnerships will increase to meet community needs for amenities, infrastructure and growth.”

“Also, in Arizona, construction will be essential in reshaping the suburban landscape of our past into the more blended and integrated urban and semi-urban environment for the future. We are seeing new demographics that have families from multiple generations that live under one roof, and this factor along with other market forces will increase density in the mixed-use urban environment.”
— Eric Hedlund, Executive Vice President and COO, Sundt Construction

Finance

“Financing will always be a key part to Arizona’s growth. How products and services will be delivered will continue to evolve. As the market heals more competition enters into the marketplace thereby giving more investors access to capital. Assuming the economy has healed and is robust, I see a lot more choices for investors, developers and consumers in the next 10 years when it comes to the availability of financing.

“In the next 100 years? The market will always go up and down and therefore there will be more boom and busts as the decades roll forward. The difference in the future is access to information becoming more available than previous decade. The speed of that information will cause market trends to shift faster. Volatility could be more frequent.”
— William L. Spart, Senior VP, Wells Fargo Bank-Real Estate

For more information on Arizona’s construction projects and new commercial development, visit az.gov.

AZRE Magazine’s People to Know 2011 reception and awards ceremony was held on November 10, 2011 at the Scottsdale Waterfront. In attendance was Arizona’s largest local and national real estate audience, including the following People to Know recipients: attorneys, accountants, city planners, property managers, economic developers and brokers.

Throughout the night, we also announced the top 11 industry leaders. Congratulations to our finalists and winners!

People to Know 2011 Industry Leaders

Architects & Engineers

Michael Medici, AIA
President

Responsibilities: Managing director and member of the firm’s board of directors, architectural management and designYears at Company: 30Years in CRE: 32Accomplishments: Medici has been with SmithGroup since 1980 and has remained active in managing several of its key projects including TGen, Arizona Biomedical Collaborative, Freeport McMoRan Center, National Renewable Energy Laboratory’s Energy Systems Integration Facility, and the POW/MIA Forensic Laboratory at Hickam AFB in Honolulu. He is active in the the community and has served as event chairman of the Annual Cystic Fibrosis Stair Climb & Firefighter Challenge; as a member of St. Joseph’s Hospital Foundation Board; and as past president of ASU Council for Design Excellence. His leadership enables SmithGroup’s Phoenix office to achieve success in the Valley, Arizona and the Southwest.

Attorneys

Michael E. Tiffany
Managing Attorney

Responsibilities: Managing attorney and head of the real estate practice groupYears at Company: 40+
Years in CRE: 30+Accomplishments: In addition to his duties as managing attorney, Tiffany concentrates in the area of commercial transactions, primarily in strategic planning, business solutions, real estate and finance. His accomplishments include closing HUD insured loans for more than 170 multi-family housing projects on behalf of borrowers, for an aggregate loan amount in excess of $2.2M; and preparing a development agreement between a landowner and the Town of Buckeye as a form for future development agreements. He is a member of the State Bar of Arizona and Maricopa County Bar Association. He is active in with the Thunderbirds and the Sheriff’s Mounted Posse of Maricopa County.

Don J. Miner
Director

Responsibilities: Focuses on various aspects of commercial real estateYears at Company: 14Years in CRE: 32Accomplishments: Miner was the buyer’s counsel in sale of a portfolio of $101M of loans secured by residential real estate mortgages, and the seller’s counsel in the sale of an 832-acre farm for development of a master-planned community. He was the landlord’s counsel in negotiation and documentation of a 115,000 SF office lease, and tenant’s counsel in negotiation of a 130,000 SF office lease. He represented the ground lessee and developer in the negotiation and drafting of a 65-year ground lease covering 37.5 acres of Native American reservation land for purposes of the development of a commercial sea water aquarium, a butterfly pavilion and related entertainment and restaurant uses. Miner is listed in Best Lawyers in America, Real Estate Law, 2003-2011.

Brokers

Responsibilities: Manages and directs the industrial supply chain marketing for institutional property owner clients and serves as an advocate for corporate occupiers of spaceYears at Company: 1Years in CRE: 30Accomplishments: Lydon has spent his 30-year career focused on the industrial commercial real estate sector. In that time, he has become one of Phoenix’s most accomplished industrial brokers. In the last 18 months alone, Lydon has directed some of Phoenix’s top industrial transactions, bringing jobs and capital to the market via deals like the 1.4 MSF Amazon.com lease and the long-term, 153,000 SF Schoeller Arca Systems lease. Lydon has been recognized as a Top Industrial Broker by the Greater Phoenix Economic Council (GPEC), named a CoStar “Power Broker” and a NAIOP Industrial Broker of the Year. He is a 25-year SIOR Designee, as well as a member of the Jones Lang LaSalle Global Supply Chain Group. On a personal note, Lydon is part owner of a Michigan-based Class A minor league baseball team.

Developers

Kurt Rosene
Senior VP

Responsibilities: Manage development, leasing and acquisitions for the Western RegionYears at Company: 20Years in CRE: 24Accomplishments: Rosene has led The Alter Group to accomplish remarkable things in Phoenix during the past 10 years. After opening the office a decade ago, he has helped solidify the company as one of the premier developers in the Valley. Nationally, Rosene has been able to develop more than $1B worth of real estate in 24 states. His expertise and level of customer service have led to numerous repeat clients. He’s earned the respect of the entire industry and made friendships throughout the country. Recently The Alter Group and John F. Long Properties of Phoenix announced a joint development of three major business parks in the West Valley totaling in excess of 1,500 acres. It is expected to create an estimated 65,000 jobs.

Economic Developers

Christine Mackay
Economic Development Director

Responsibilities: Directs economic development division, implementing programs to increase and diversify City’s economic baseYears at Company: 14Years in CRE: 19Accomplishments: Mackay has been with the City of Chandler for 14 years. During the past five years, she has helped locate or expand more than 145 companies in Chandler, and brought more than $8.9B in capital investment into the community. She was instrumental in helping land the $5B Intel Fab 42 chip manufacturing facility. In 2007, she was named the Economic Developer of the Year, Large Community, for the State of Arizona by the Arizona Association for Economic Development (AAED). In 2010, Mackay was named Leader of the Year in Economic Development-Public Policy by the Arizona Capital Times. She has spent most of her career in commercial real estate. Before coming to Chandler, she was in private sector commercial real estate where she was the research director for a commercial brokerage firm.

Financiers & Accountants

William L. Spart
Senior Vice President

Responsibilities: Business development for Wells FargoYears at Company: 21Years in CRE: 30Accomplishments: Spart, a 30-year veteran of commercial real estate finance, has witnessed the ups and downs of the industry firsthand. Perhaps that’s why he has taken a leadership role. During his tenure at Wells Fargo, Spart has been active with NAIOP (as a board member), Valley Partnership, Urban Land Institute and the International Council of Shopping Centers (as a member). Spart is a regular speaker at public forums around the Valley and was a member of the 2010 NAIOP roundtable in AZRE Magazine. In his position at Wells Fargo, he manages a diverse portfolio of commercial real estate loans and lenders.

General Contractors

Hamilton Espinosa
National Healthcare Leader

Responsibilities: Developing DPR’s strategic healthcare visionYears at Company: 13Years in CRE: 21Accomplishments: Espinosa, LEED AP, brings more than 20 years of construction industry experience to DPR. Based in Arizona, Espinosa is key to building the company’s healthcare experience locally and nationally. Instrumental in building more then $3B in healthcare projects, including the Banner MD Anderson Cancer Center in Gilbert, his reputation of producing results and developing long-term working partnerships is acknowledged throughout the industry. DPR is one the country’s top technical builders and has been ranked among the Top 50 general contractors in the U.S. for the past 10 years. Espinosa serves as vice chair of the St. Joseph’s Foundation board and is a member of the Arizona Diamondbacks Foundation board.

Property Managers

Responsibilities: Oversees 600,000 SF of Class A office space, including three buildings which are 100% occupiedYears at Company: 4Years in CRE: 25Accomplishments: Stromgren joined NorthMarq when the organization acquired his previous employer, Opus Property Services, a move that doubled its portfolio to 60 MSF. For nearly 10 years, Stromgren served as a senior property manager with Opus West Management. Prior to that, he was a general manager with LaSalle Partners. He is an active member of BOMA and NAIOP. He was recently elected to serve as president of BOMA Greater Phoenix for the 2011-2012 board year. He is also a past president of the chapter and has served on the board of directors for 13 years. In addition, he has earned the organization’s RPA designation. He is aso a LEED AP and holds real estate brokerage licenses in Arizona and Colorado. He earned a BS degree from UCLA.

Subcontractors

Daniel Puente
Founder & President

Responsibilities: Provides the necessary planning, organization, direction, coordination and control to meet company growthYears at Company: 20Years in CRE: 30Accomplishments: Big events lit up the offices at D.P. Electric. Puente, founder and president, was awarded the W.P. Carey Spirit of Enterprise Gary L. Trujillo Minority Enterprise Award, and the company celebrated its 20th Anniversary — growing from a firm with four electricians in a garage to a multi-million dollar local success story. Puente is a strong supporter of education and training aimed at fostering personal and professional growth within his organization. He acts as a mentor to educate small minority-owned businesses within the community. He oversees all aspects of the company, including profitability, staffing, marketing efforts, and customer and vendor relations.

Up and Comers

Kimberly Mickelson
Marketing Associate

Responsibilities: Social media, proposal development and website management for clientsYears at Company: 2Years in CRE: 8Accomplishments: Not only is Mickelson one of just three Certified Social Marketing Specialists in the Arizona, she is also heavily involved in the commercial real estate industry. With SMPS Arizona, she is an active member, programs committee member, publicity committee member and social media chair. She is also moderator for the SMPS Twitter account and is in charge of blog submissions for the Building Arizona blog. She is an active affiliate member of AIA Arizona, and an active young leaders group member of ULI. She has coached and trained many organizations and individuals on valuable emerging marketing practices. She recently received the 2010 SMPS Arizona Chapter Rising Star Award. Her desire to make an impact goes beyond personal accomplishments or within her work with Small Giants.